“If you’re ignoring that, and you’re still raising rates regardless, then you’re going to find yourself very soon running the risk of overdoing it, substantially overdoing it,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. The Fed, they say, should look less at backward-looking data such as the unemployment rate and more at where such trends appear headed. Supply chain snarls are no longer blocking trade, thereby lowering the cost for new and used cars, furniture and appliances.Īs hiring and job openings decline, wage growth should also slow, some economists argue. Gas and energy prices have fallen steadily. The growth in rental costs has started to decline as more newly built apartments have come online. The consumer price index rose 5% in March from a year earlier, sharply lower than its 9.1% peak in June. Some major drivers of higher prices, such as rents, energy, and used cars, have puttered out or started to reverse, causing sharp drops in overall inflation. Most crucially, the policymakers must decide where they think inflation is likely headed. At the Fed’s meeting in March, Powell had said that if banks restricted lending, it could act as the equivalent of an additional quarter-point rate hike.įed officials will have information from a survey of bank loan officers when they meet this week, though the results won’t be made public until next week. That suggested that the Fed as a whole was leaning toward additional hikes.Įvidence of a sharp pullback in lending might even make Powell more comfortable about hinting that this week’s rate hike might be followed by a pause. Seven of the Fed’s 18 policymakers, though, projected that rates would exceed 5.1%, while only one policymaker forecast a lower rate. Those forecasts are issued once each quarter, so they won’t be updated until June. “He could very credibly say, ‘It makes sense for us to take a breather here, and we’re not lowering them, so the rates are still really high,’ ” Tang added.Īt the Fed’s last meeting, in March, its officials forecast that they would implement one more hike and then leave rates unchanged until next year. Even so, investors are predicting two Fed rate cuts by year’s end, according to CME’s Fedwatch tool.Īnother quarter-point rate increase on Wednesday would leave the Fed’s key rate at 5.1% - a 16-year high and a full 5 percentage points higher than in March 2022. We could still hike more if we think we need to, but we don’t know if we have to yet,’ ” said Derek Tang, an economist at LHMeyer, an economic consulting firm.įederal Reserve likely to skip interest rate hike at next meeting in June, officials signalĮven if Powell strongly suggests that the Fed will pause its hikes after this week, Tang said, he will likely emphasize that the Fed doesn’t expect to cut rates anytime this year. “He wants to kind of tell the market, ‘Don’t relax. Instead, he will probably stress that further rate hikes could happen if inflation were to stay persistently high, well above the Fed’s 2% target rate. Yet he won’t necessarily send a clear sign that this week’s hike will be the Fed’s last. Yet economists and Wall Street traders will be more interested in what the Fed and Chair Jerome Powell signal in a statement and at a news conference about a bigger question: What comes next? And on that note, they may be disappointed.Įconomists say Powell will likely hint that the Fed is edging closer to a long-awaited pause in its rate increases. WASHINGTON (AP) - The Federal Reserve is on track to raise its benchmark interest rate for the 10th time on Wednesday, the latest step in its yearlong effort to curb inflation with the fastest pace of hikes in four decades.
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